Advanced Search
MyIDEAS: Login to save this paper or follow this series

Volatility of Resource Inflows and Domestic Investment in Cameroon

Contents:

Author Info

  • Sunday A. Khan
Registered author(s):

    Abstract

    Cameroon is a small open economy that relies on the export of a few primary products for its foreign exchange earnings. The low rate of savings cannot meet the investment requirements, and investment has been declining despite many years of economic reform. There is consequently a resource gap that has to be filled by both official and private resource inflows, but these resource inflows have similarly been declining. They have also become highly volatile, thus undermining their positive effects on capital formation and consequently on economic growth and poverty reduction. This study examined the effect of resource inflows and their volatility on domestic investment in Cameroon. The results show that inflow volatility is high and that export revenue volatility is the prime mover of aggregate volatility. There is no evidence of inflow volatilities reinforcing or offsetting each other. Aggregate resource flow is important for both public and private domestic investment, while its volatility is detrimental. When total resource flows is disaggregated into export revenue, official flows, foreign direct investment and “other private flows”, only export revenue and “other private flows” significantly affect private investment, indicating that the impact on investment varies depending on the type of inflow. The volatility of official flows and export revenue hurts investment directly, but also negates the influence of the other inflows on both private and public investment. The study suggests that government make more efforts to attract more resource flows into the country and, especially, to reduce their volatility. Diversifying export supplies to minimize price fluctuations, complying with aid conditionalities (this should be facilitated with the country ownership of the poverty reduction strategy), developing a robust and transparent financial sector and stock exchange, and avoiding frequent and unpredictable policy shifts are among the actions that can go a long way to reduce resource flow volatility. Domestic investment, and consequently growth and poverty reduction, should be the main beneficiaries.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.aercafrica.org/documents/RP221.pdf
    Our checks indicate that this address may not be valid because: 403 Forbidden. If this is indeed the case, please notify (winston wachanga)
    Download Restriction: no

    Bibliographic Info

    Paper provided by African Economic Research Consortium in its series Research Papers with number RP_221.

    as in new window
    Length: 54 pages
    Date of creation: Jan 2011
    Date of revision:
    Handle: RePEc:aer:rpaper:rp_221

    Contact details of provider:
    Postal: P.O. Box 62882, Nairobi
    Phone: (254-2) 228057
    Fax: (254-2) 219308
    Email:
    Web page: http://www.aercafrica.org
    More information through EDIRC

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:aer:rpaper:rp_221. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (winston wachanga).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.